Commodities Comment:Downgrading the nickel price outlook

The collapse in nickel prices to six-year lows has taken the market by surpriseand certainly was by not expected by Macquarie. The first-quarter 2015 priceaverage (at $14,338/t) was a substantial 13% lower than our forecast of$16,500/t made at the start of the year. For a number of reasons, outlinedbelow, we have prudently downgraded our nickel price forecasts for thecurrent and subsequent years by an average of 13.5% to reflect the lowerbase from which we are forecasting and also the higher level of stockoverhang remaining through the forecast period.

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    Oil prices fell nearly 5% on Wednesday after the EIA reported a considerable11m barrel increase in US oil stockpiles, the largest weekly increase sinceMarch 2001. The shock had a knock-on effect on precious metals, which hadbeen trading firmly, and spread to base metals, with LME 3-month coppershooting down $40/t in 15 minutes to below $6,000/t once again, before buyinginterest into the close delivered a bounce back above the line.

    Following reports in the Shanghai Securities Journal that the Chinesegovernment was considering a subsidy for domestic iron ore miners, Mysteelhas reported that premier Li Keqiang announced yesterday that resourcestaxes for iron ore would be cut by 40